Stimulus package has created “false dawn” for many businesses

14 May 2020

BDO Australia has commented on the challenges being faced by businesses across Victoria, as it’s reported more than 130 businesses across the state have gone into liquidation or voluntary administration since the COVID19 crisis began.

Nicholas Martin, Business Restructuring Partner at BDO in Australia, spoke to News Limited about the current situation and what businesses should be doing now to ensure they emerge on the ‘other side’.

“Some businesses may need to make difficult decisions – do they push on or bow out gracefully? This requires a robust analysis of the business’ viability and available capital,” Nicholas said.

“The stimulus package and concessions may have created a false dawn for many businesses. It would be a great pity to see businesses wrestle their way through lockdown, exhaust their capital, commence a restart, and then find that the sheer weight of deferrals has created a mountain of debt that can’t be paid, exposing the equity in the family home,” he said.

“While the range of lifelines has been welcome news for many businesses, any debts accrued or liabilities that have been deferred will need to be paid. The aim should be to recommence trading without significant liabilities being unpaid at the restart. Many businesses are exhausting their available capital during this lockdown phase. They’re going to need to negotiate liability reductions – deferrals buy time but don’t solve the business’ longer-term viability.”

Businesses must start preparing for when the support of banks, landlords, suppliers, and government ends and planning for how they will they come out the other side to be self-sufficient and viable.